Re: Winton, Ex Parte: Jolliffe

[1987] FCA 818

e..

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IN TBE EZDERATJ COURT OF AUSTRALIA

GENERAL DIVISION

BANRRUPTCY DISTRICT IN TEE STATE OF	)	NO. W 168 Of	1984X
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NEW	SOUTH W A L E S AND	1
)

TEE AUSTRALIAN CAPITAL TERRITORY 1

Re :

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KENNETE GRAFlAM WINTON

Debtor

Ex parte:

JAMES JOEN JOUIFFE

Deputy Registrar

in Bankruptcy

CORAM: Einfeld J

PLACE: Sydney

- DATE: 1 0 June 1987

EX TEMPORE m

This is an application on behalf of the bankrupt, Kenneth James Winton,

for an order pursuant to section 1 4 ( 5 ) of the Bankruptcy Act 1966 ("the Act") that a summons of the Registrar under section 81 of the Act be

reviewed. He also seeks review of section 81 summonses issued to two

companies called Latia Pty. Limited and Cataplumb Pty. Limited to

produce records and other documents.

Heard at the same time as those two applications were applications by

those two companies that the summonses issued against them under section

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81 should be set aside. I have some doubt about whether Mr. Winton can

properly be an applicant for review of the issue of the summonses against the two companies, but because those companies have raised the same matters in argument on their applications to set aside as has Mr.

Winton in his applications for review, it is not necessary to decide

that matter in this particular case. All applications for the summonses

were made by the Deputy Registrar in Bankruptcy ("the respondent").

The grounds upon which all applications sought the orders referred to

were that firstly the respondent had no status to bring the

applications, and secondly, that the summonses themselves were too wide,

oppressive, and insufficiently precise. So far as concerns the question

of the status of the respondent to bring the application, this was put

on two grounds at the commencement of the hearing. The first ground was

that under section 81 itself the application can only be brought by a

creditor or by the official receiver or trustee.

Section 15(4) provides that the Inspector-General may by written

document direct an officer to exercise and perform such of the powers

and duties of an official receiver as he specifies in the direction.

The evidence discloses, through an affidavit filed by the respondent

and dated 25 March 1987, that he was appointed by the Inspector-General

under section 15(4) to carry out the relevant duties of the official

receiver in this matter. There is therefore no substance to the point

taken in respect of this aspect o f the respondent's	status to bring the
proceedings.

The second attack on his status is that under section 15(4), the only

person who may be directed in this way by the Inspector-General to exercise the official receiver's powers and perform his functions or

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duties is "an officer".	It is said that the Deputy Registrar does not
so qualify.

"Officer" is defined in section 5(1) of the Act as an "officer of the

court or of the Commonwealth". It having been previously determined by

a case which is binding on me that a registrar in bankruptcy is not an

officer of the court, James v Deputy Commissioner of Taxation (1956-57)

97 CLR 23, the question raised by way of objection to his status in this

matter is that he is not an "officer o f the Commonwealth".

That argument was not raised in any of the three applications presently

before the court when the matter was commenced. During the hearing I

gave leave to the applicant debtor and the two applicant companies to

amend their applications to raise that particular point, reserving all

questions of evidence and costs that arose	from the late notice of that
matter.

In order to permit further argument and perhaps further evidence to be

addressed to that issue, I will reserve the rights of the parties in

this regard and make no decision on the matter at this stage as it has

not yet been fully litigated and argued, still less considered by me.

At the end of this judgment, I shall fix a timetable and a date for the conclusion of that particular aspect of the litigation.

The second attack on the summonses relates to a different question

altogether. It is said that the form of the summonses provides no

guidance or direction at all in relation to the companies as to what

documents are being sought and to what issues the documents relate.	My
attention has been dram to some case law, which I accept without

question, to the effect that it is not permissible to use section 81

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summonses as what are known, generally speaking, as fishing expeditions;

nor may they be expressed in terms which impose oppressive burdens on

the person expected to respond in the supply of documents, records	and
other material.
In one of the cases mentioned, Rees v Kratzmann (1965-66) 114 CLR	63,

Windeyer J at 79 said in the context	of an analogous provision relating
to the winding up of companies:

"The matters on which a person may be examined are, however, not

wholly at large. The court which directs the examination must, I

take it, state in its order whether the person s m n e d Is to be

examined on matters concerning the prmtion or fomtion, o r the

conduct of the business of the company, or, in the case of an

officer or fonner officer of the ccanpany, as to his own conduct

and dealings as such officer. And the court before which the

examination is held has a discretion as to the questions that may

be asked. The boundaries of the discretion are admittedly not

defined. But the purpose of the inquiry is to gain infonration

that may be relevant for the proper conduct of the WirStmg-up of

the affairs of a campany in relation to which there are prim

facie grounds for thinking that some fraud has been conitted or

some material fact concealed. Doubtless a court would be guided

in the exercise of the discretion that the Act gives by its

apparent policy and purpose. "

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There is reference later in his Honour's judgment at page 80 to the

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!	balancing of the question of what a lawyer regards as justice in common
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I	law terms on the one hand, and the place for such concepts of justice,
!
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1	normally applicable to the criminal law, in the Chancery Court as it was
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1	then and in the bankruptcy jurisdiction in this particular case. He
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observed that the common law concepts have little place in the
bankruptcy jurisdiction. In other jurisdictions orders of the court to
third parties to produce documents are in the main viewed from the
standpoint of whether the respondents to the orders may be put t o great
expense or trouble, not merely in producing the documents but in
identifying from a vast bulk of material what precisely is relevant and

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is required. Eowever, it seems translating the views of Wlndeyer J to

the situation existing here that such concepts are generally

inapplicable in the bankruptcy jurisdiction, especially in relation to

section 81 summonses, except perhaps if the scope, of the summonses is

grossly irrelevant, intrusive or otherwise offensive to justice.

Until recently, it appears to have been the practice if not the law that

a respondent to a section 81 summons was not permitted to see the

application upon which the summons was based and which brought about its

issue, still less the evidence in support of the issue produced to the

Registrar on the application for the summons. In this particular case,

I permitted access to the material which was used to ground the issue of

the summons, not merely because this course was consented to by the

respondent as the appointee of the Inspector-General, but also because,

in my view, each case must be determined on its own facts. In this

particular case, there was no apparent reason for not permitting the

debtor or his representatives to have access to the relevant material.

There appears to be some dispute in,the authorities as to whether the

documentation which preceded the issue of the summons needs to establish

what is strictly called a prima facie case for the summons or whether it

is some lesser level of proof. Sir George Jessel in Re Gold Company 12

Ch D I1 at 84, described the test as being the probability	of a case
being made out.

The case to which this test must be applied will vary with the

circumstances. It may be a fraud or suspected fraud. It may, on	the
other hand, merely be an inquiry in the interests of creditors to	see
what assets might be available for distribution to them, and there	are

many other possibilities that come to mind. The applicants in this

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case, having been given access to the application, would immediately

discover, and have discovered, what is being investigated, or sought to be investigated, as to the relationship between the debtor and the two companies concerned.

These companies have been listed in the respondent’s statements of

affairs as being substantial creditors of his - in the case of Latier

Pty. Limited for a sum of money in excess of a quarter of a million

dollars, and in the case of Cataplumb Pty. Limited, for just over

$50,000. this in the context of his having disclosed assets of $5.624

and liabilities of a little over half a million dollars.

The applications in respect of the issue of the summonses allege a

potentially close relationship between the debtor and those two

companies. It would be expected that at least the companies’ records

would disclose the way in which the respective debts were incurred and

for what services or goods they were incurred. The companies’ records

would also be expected to disclose the exact relationship of the debtor

with the companies and a summons would permit the possibility of an

examination as to whether these companies are, in fact, true creditors

of the bankrupt’s estate or have some other less wholesome place in the

scheme of things. None of this has been denied	by the applicant or the
two companies in these proceedings.

In my view, therefore, a section 81 summons needs to be looked at not merely in terms of the traditional authorities on supboenas to third

parties who are strictly arms length entities for whom they can claim no

attachment. It is not even a question of section 81 summonses needing

to be looked at in the light, as Mr. Justice Windeyer described it, of

the apparent policy and purpose of the Bankruptcy Act.

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They must also be looked at in the context of the applications to which

access was given and, for that matter, to the affidavits filed in support of the applications. This context is that the two companies are

associated with the debtor and for whom he has some responsibility.

There is therefore no question of the debtor having to paw through

every line of substantial evidence, which is strange to him, nor for

that matter, of the companies officers being required to go through

every document attached to the affidavits in support of the applications

for the issue of the summonses, with which they are familiar.

In my view, such applications need not identify every document sought in

a way which shows its immediate relevance to any specific question that

might arise but merely to identify the classes of documents and the

categories of documents that the summons might reasonably cover. In the

event that any difficulty arose in relation to a liability for

production of an appropriate document, the matter could no doubt be

dealt with by the Registrar on the examination	or referred to the court
for further decision.

These summonses, and their applications, make quite clear what documents

are being sought and the purposes for whlch they are being sought. In

those circumstances, there seems to me to be no ground for complaint

available to the debtor or the two companies that	the summonses are too
wide or oppressive or insufficiently precise.

For the above reasons, I shall dismiss those aspects of these

applications as challenge the terms of the summonses themselves and

reserve the decision as to the status of the respondent to issue the summonses so as to allow the respondent to file written submissions.